Chapter 15 - Oligopoly And Strategic Behavior

Question 1

Oligopolies exist when only a(n) ___________ firms control all or most of the production and sale of a product.

Answer 1

Few

Question 2

In oligopoly, products may be either homogeneous or _________.

Answer 2

Differentiated

Question 3

In oligopoly, _________ to entry are often high, preventing competing firms from entering the market.

Answer 3

Barriers

Question 4

In oligopoly, firms can earn long-run ___________ profits.

Answer 4

Economic

Question 5

Oligopoly is characterized by mutual _________ among firms. Oligopolists must _________ because the number of firms in the industry is so small that changes in one firm’s price of output will affect the sales of competing firms.

Answer 5

interdependence; strategize

Question 6

In oligopoly, barriers to entry in the form of large start-up costs, economies of scale, or ___________ are usually present.

Answer 6

Patents

Question 7

The economy of large-scale production _____________ new firms from entering a market, because high initial average total costs impose heavy losses on new entrants.

Answer 7

Discourages

Question 8

Mutual interdependence means that no firm knows with _____________ what its demand curve looks like. The demand curve and the proft-maximizing price and output will depend on how others ___________ to the firm’s policies.

Answer 8

certainty; react

Question 9

Because they are mutually interdependent, oligopolists are tempted to get together and agree to act jointly, or to ____________, in order to reduce uncertainty and raise profits.

Answer 9

collude

Question 10

The economy of large-scale production _____________ new firms from entering a market, because high initial average total costs impose heavy losses on new entrants.

Answer 10

Discourages